Wealth Check: 'Is a new career in music financially sound?'

Vicky Tilson has swapped her comfortable life working in the civil service to become a musician. She left behind a generous pension and a higher than average salary, and plans to top up her £20,000 income with performances and teaching.

The 33-year-old is now keen to get on the housing ladder with the help of her parents and wants to get her pension back on track. But she's also realistic. "The key thing for me is to maintain a comfortable standard of living in my own home, with a car and the odd holiday," she says. "I'm prepared to save what I will need for retirement, and I'm happy to work until I'm 70."

Three financial advisers help Vicky this week, Alex Pegley of Calculis, Kevin Anderson of Budge and Co., and Danny Cox of Hargreaves Lansdown.

CASE NOTES: Vicky Tilson, 33, musician
Income: £20,000 salary with up to £4,000 top up
Monthly outgoings: £685 – includes £570 for
Pension: Around £1,495 a year, plus a lump sum of £2,788, based on current pension contributions
Savings: Abbey cash ISA worth £16,500, Norwich Union ISA worth £1,400 and a Norwich Union Investment ISA worth £892. ING Direct savings account has £5,500.
Mortgage: £0
Debts: £5,000 student loan

Pension

All three advisers warn Vicky that by resigning from the civil service, she has left behind one of the best pension plans available. "But she has done the correct thing by leaving these benefits as a deferred pension, not frozen, as many people think," says Kevin Anderson. "These deferred benefits will increase by inflation between the date she left and her retirement."

But Danny Cox says that the greatest gain from final salary pension schemes and the state pension could be by taking them as soon as she reaches the right age.

Until then, he adds: "A £100 per month contribution will cost just £80 because of the tax relief. This could provide her with a fund of £185,000, which would provide a pension in today's terms of around £3,700. This assumes a 6 per cent investment return after charges."

Vicky would like to retire on around £25,000 a year, but Cox warns that this contribution is unlikely to be sufficient to meet her income needs, even when added to her other pensions. "Vicky should save as much as she can as early as possible and build upon that over the years," he suggests.

Mortgage

Vicky wants to buy a house within a year, but the advisers believe this may not be the right time to buy. Alex Pegley warns that most of the downward pressure on property prices is decreasing the amount that is available from mortgage lenders. "As a non-property owner, Vicky may find it more difficult than existing homeowners to secure a mortgage," he says. "The key for Vicky will be the size of the deposit she can get. There are still some 90 and 85 per cent mortgages available, but they are getting fewer and the terms are deteriorating."

And Anderson warns that Vicky's varying employment status will present challenges for lenders. He says that she has made an admirable decision to pursue her love of music "but should try to save as much money as possible and reassess her circumstances in one year's time".

Savings and Investments

Vicky should think about transferring her money from her ING account into an ISA, suggests Anderson. "Many people are unaware that they can transfer between cash ISA providers in order to maximise returns," he adds. Pegley agrees that Vicky should review where her savings are held. "Alliance & Leicester's eSaver, for example, is currently paying 6.5 per cent, and her ISA may also benefit from being moved to Scarborough Building Society at 6.5 per cent," he says.

To find an independent financial adviser in your area, visit www.unbiased.co.uk

For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Content Writer - Global Financial Services

    £25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Web Developer - PHP

    £35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

    £15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Loan Underwriter

    £18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

    Day In a Page

    The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

    The Silk Roads that trace civilisation

    Long before the West rose to power, Asian pathways were connecting peoples and places
    House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

    The honours that shame Britain

    Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
    When it comes to street harassment, we need to talk about race

    'When it comes to street harassment, we need to talk about race'

    Why are black men living the stereotypes and why are we letting them get away with it?
    International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

    International Tap Festival comes to the UK

    Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory
    Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

    Cook not the only one to be caught in The Oval mindwarp

    Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
    Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

    Can Benitez get the best out of Bale?

    Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
    Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

    Beijing witnesses new stage in the Jess and Kat rivalry

    The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
    Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

    Jeremy Corbyn interview: A shrewd operator desperate for power

    His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
    Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

    Isis executes Palmyra antiquities chief

    Robert Fisk on the defender of the ancient city's past who was killed for protecting its future